Apartment rental businesses are very lucrative and are easy to start up.
You don't need a lot of money, or experience in property management or the real estate industry to make some serious cash in the rental property business. Rental properties are always in demand which is why this is a sustainable business. One of the best features of starting a rental property business is that your business will be cash flow positive very quickly; in some cases, as soon as your client signs the lease agreement for the apartment.
I have been involved with apartment rentals for over 15 years and can tell you from my own personal experience, I've never had a problem getting tenants. In the past few years alone, I have more than tripled my income from the demand for rental properties.
Very low start up costs
Starting a rental property business does not require much money because it does not require owning any rental properties, you are simply renting real estate rental property owned by others such as real estate investment companies, real estate investors, urban families, a rental property business owner or a real estate investment club.
Running successful rental businesses requires hustle so if you have the drive and the energy you will be successful. Initial investment is you!
Real Estate Licenses
If you already have an apartment leasing license or a real estate brokers license, you can start an apartment rental business within the brokerage firm that holds your license.
Getting an apartment rental license is just a matter of taking a course and passing an exam administered by the State where you will be renting apartments.
Licensed Business Partner Route
You don't necessarily have to be a licensed broker to get involved in apartment leasing. In fact, it is very easy these days to team up with other agents who are already established and work as a team for your mutual benefit. In Chicago for example, there are owners of apartment rental businesses who are not licensed Managing Brokers but their business partner is so their rental property business is legit.
Real Estate Teams
Or if you are already licensed as a broker or leasing agent but not as a Managing Broker, you could start an apartment rental business within the brokerage, it might make sense to team up with another agent who works for the same brokerage firm where you already have your license.
The other agent could bring along his or her own existing customer base and you would both share in the profits of the rental business and may also decide splitting some costs. You don't necessarily need to team up with a real estate broker but it might be nice if they work out of the same office and share the same available office space and time and other resources.
Agreements with large real estate management companies
The fastest way to start an apartment rental business is by teaming up with a large property management company that has thousands rental apartments all over the city.
The best features of a rental property business that works with larger real estate management companies are:
Their leasing office is on site at the property and the on site leasing agent will conduct the tour of the property, complete the rental agreement and other business paperwork related to the apartment rental. Your rental property business still gets the commission since commission is paid to the rental property business that procures the tenant!
Rental properties always come available within a large building.
You will gain valuable knowledge whilst touring multiple properties and by becoming expert on their one property or their many properties, you will be more adept at pitching the property to your target market
Access to multiple property listings
Successful apartment rental businesses will have access to many rental properties. By forming business relationships with large multi family (apartments) real estate developers (owners) and real estate property managers (also known as real estate operators) or rental investment property owners you will get access to property listings which include price and availability.
Typically, the real estate property manager will send weekly lists of apartments available at the property and the commissions offered.
Real Estate Rental Commissions
Big City
Just about every city such as Chicago, has large real estate owners and/or real estate operators that pay a broker or leasing agent the equivalent of one month's rental income on a 12 month lease. Just about every big city uses this formula and the property manager will be able to fill you in on their specific operations and commission agreements.
The average rental market for a one bedroom apartment is $1200. In some cities, such as Chicago it runs from $1800 and up.
In most cases, the owner/operator company will pay a commission equivalent to one month's rent of the first 12 months of a new tenants lease.
College Towns
College towns and small cities may be a little different since much of the real estate is owned by individual real estate investors and private investors who rent out the investment property themselves or have a real estate manager handle their rental property business.
In many cases, a Property Management Company will have both a resident manager and leasing agent on staff. In smaller cities or where there is not a lot of competition for tenants, a property management company may only have one leasing agent who doubles as a resident manager.
You can always offer to split the commission with them 50/50. The more listings you have the more prospective renters you will attract. Because real estate is a numbers game you need a continual flow of inventory and prospective renters.
Student Housing
Student Housing has become a very attractive real estate investment space for real estate investors looking for continual cash flow. A large real estate investor will usually build a new property or multiple new properties in college towns.
If you are looking for a rental property business model, student housing can be very profitable. Although these professional new property developments have full time on property leasing agents, it pays to develop relationships if you can bring them new business especially if there is a lot of competition for tenants and rental rates are on the decline.
A new property needs to produce cash flow quickly. Reliable Income producing properties are essential to every real estate investor and investor members want to see cash flow. Leasing up a new property quickly is essential and often owners rely on business brought in by brokers and leasing agents.
There is one catch though - the management company will probably want to pay you a 1/12 of 12 months rent for student leases that are 6 months or longer.
However, because the demand for student housing has increased dramatically over the past several years, you can get away with asking for a whopping 3/12 of 12 months rent - because the supply is so limited. This means that if they are paying $1200 per month in rent ($14,400 per year) the commission would be $1760 ($2160 for 6-12 months leases).
But normally, a management company will only pay up to one month's rent for a 12 month lease.
Business Relationships
It is better for your apartment rental business to have continual deal flow even if it means settling for a lower commission once in a while or whilst you develop relationships for your apartment rental business. The vast majority of successful rental property business owners prioritize building business relationships to become a trusted partner. It's not about doing an existing rental property deal here and there, the name of the game is getting exclusive contracts with developers or real estate investors who own multiple properties.
In many business cases, a multi family owner/operator will have both a resident manager and leasing agent on staff. In smaller cities or where there is not a lot of competition for tenants, a property management company may only have one leasing agent who doubles as a resident manager
Getting Started
To get started in the rental property business, contact reputable real estate property management companies and offer your services as an agent or broker. You can find those companies by searching the web for multi family housing property managers in your area.
You need to build a strong business relationship with each property manager, assistant property manager and the on site leasing agents. If they don't trust you they won't work with you.
Once you have registered with the companies you will receive weekly's email blasts of rental listings coming available in those apartment complexes.
Posting Property Listings
Once you have property listings, go ahead and post them on social media especially apartment rental websites. It is vital that your photos be sharp and the rental properties information including prices are accurate.
The more pictures you have of the property with great lighting, then prospective renters will be able to make a better decisions.
Typically, the property manager may require that you put up their photos only. By doing this, it gives them confidence that you are serious about building up your apartment rental business and the leads you generate wi;; be interested.
Apartment Listing websites
It is important to be highly visible on sites for rental properties like Craigslist, Apartment Finder, Zillow, Apartments.com and the other large apartment rental websites. You can do this by placing ads on those web pages for a nominal fee if any. You will need to establish a good working relationship with both the property managers and the on site leasing agents so they know you are interested in helping them succeed.
Additional social media accounts like TikTok, Facebook, Instagram and others are beneficial provided the owner/operator of the rental property gives you permission to use these channels. If you don't follow instructions of the rental property owners/operators they will not do business with you or your rental property business.
To be successful in the apartment rental space as your business expands and you build long term equity be sure to focus on maintaining strong relationships. Relationships with the properties you represent and also with the tenants that you place in those properties will keep your cash flow flowing throughout the year and not just in the high demand rental season May-September.
Learn the Business
If you are not quite ready to start your own rental business, there is no shame in gaining valuable experience working for an existing property rental business. Typically, apartment rental agents are Independent Contractors.
As Independent Contractors you are free to choose which properties you wish to work with and the company you would like to represent.
As an independent contractor it is in your best interest to set up an LLC which provides personal asset protection. Once you have your LLC set up contact reputable property management companies and offer your services as a rental agent or broker.
Apartment Rental Business Success Story:
A college student, Theo, did not have enough time to work full time at an or existing property management company while going to college so he worked flexible hours as an Independent Contractor apartment leasing agent. He quickly learned the business and recruited 3 buddies to work under him on Team Theo. Theo sets up the showings and 2 of his buddies do the physical touring of the property. The third buddy is responsible for advertising the listings on social media.
By forming an LLC, Team Theo became Team Theo, LLC and Theo's personal assets and income were protected from Team Theo, LLC liabilities.
As a small business owner you will also need:
EIN number: To open your business bank account as this creates the needed separation between your personal assets and your businesses ones.
Registered agent: If you do not want to use your own home as the address on the record for receiving legal notices on behalf of your LLC. at business registration we offer this king of services and it is really easy to set up.
Annual report: Small business owners must file an annual report to the state where their LLC is registered under this allows the state to keep record about your business location and information about the people who have authority in your LLC.
At Business Registration our specialist are available to answer all your question about compliance. You can call at: 888.982.0718 or email us to: support@businessregistration.org
Bottom Line:
You'll face the same problems that any new business entails, but what makes this job so appealing is that you get to meet new people and go from one showing to the next, which sets it apart from other jobs where you are confined to one location for the day. You may also control your hours and have more flexibility with your schedule if you wish.
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